More than $1 billion needed to explore Vaca Muerta – Argentine experts say

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Argentina may have the world’s second largest gas reserves, after China, and the fourth largest of oil, after Russia, the United States and China, but tapping these reserves will be neither easy nor cheap. According to a report from  The Argentine Institute of Petroleum and Gas (IAPG) released on Friday, exploration of the Vaca Muerta shale deposits will cost more than US$1 billion over the next 20 years.

The majority of this money will go to fund between 4,300 and 8,000 kilometres of pipelines and to add five million new clients to the country’s natural gas network. According to the report, more than 40 percent of the current pipelines and about 17 percent of the compression plants are more than 40 years old. Most of the country’s pipelines would have to double their capacity to reach the expected demand.

IAPG head Ernesto López Anadón said the number of people who have access to natural gas in the country will grow 63 percent from the current 8.19 million to 13.2 million. Such growth will demand an average 260 million cubic metres of gas per day with peaks of 290 million cubic metres in winter, 83 percent more than the current amount of between 140 and 160 million cubic metres.

“That’s an enormous challenge which involves all the sectors such as production, transportation and distribution. It’s an strategic objective for the country considering the large participation of natural gas in the energy matrix,” Lopez Anadón said, talking with the press at the report’s presentation.

If managed well, the rich Vaca Muerta field can turn Argentina into a net exporter of oil and gas. According to a report issued by the EIA on Friday, Argentina has already moved to the forefront of the shale race, as one of only two countries in the world (alongside China) producing commercial quantities of shale gas.

As the EIA reports, Argentina’s Yacimientos Petroliferos Fiscales, or YPF, has paired up with Chevron, Dow Chemical and Malaysian oil company Petronas to pump a daily 22,900 barrels of oil and 67 million cubic square feet of gas in various fields within the Vaca Muerta shale region. Other partnership deals struck by YPF include those with China’s state-owned oil company Sinopec and Russia’s giant: Gazprom – also to explore the Vaca Muerta.

However, Argentine sources do not confirm the EIA’s optimistic estimates. The Buenos Aires Herald reported on Saturday – quoting data from The IAPG – that the country does not yet produce shale gas on a commercial scale, as it still has large reserves of conventional gas. YPF’s shale oil production represents 10 percent of the company’s total output, and between three and four percent of the oil extracted by all operating companies in the country.

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